Dan Walters

Medical care now California’s biggest industry, dwarfing all others

Four of the 17 measures on the Nov. 8 state ballot relate directly to financing Californians’ health care, and collectively they would have tens of billions of dollars in impact.

But in a sense, that’s just peanuts, which takes a little explaining.

Propositions 52, 55, 56 and 61 indirectly symbolize a massive, if often misunderstood, transformation in California’s economy over the last few decades.

When Jerry Brown was serving his first stint in the governorship 40 years ago, California was experiencing the end of one economic epoch – the post-World War II dominance of manufacturing – and the onset of a post-industrial economy rooted in trade, technology, communications and services.

While Silicon Valley – Apple, Google and other high-tech companies – is the globally powerful symbol of that evolution, from a purely economic standpoint, the explosion of medical services tops everything.

A new UCLA Center for Health Policy Research study reveals that we Californians are directly or indirectly spending a mind-numbing $367.5 billion a year on our physical well-being, equal to 15 percent of the state’s $2.5 trillion economy.

That makes it, by a huge margin, our largest industry, dwarfing such high-profile California mainstays as movies, agriculture, aerospace and tourism.

The $50 billion film industry, for instance, is scarcely one-seventh the size.

Oddly, however, it takes something like the UCLA study to drive home the point, because medical care encompasses so many specific activities that, in official data, are counted separately.

Hundreds of thousands of Californians, from hospital security guards to brain surgeons, and from insurance claims processors to electronic technicians, are employed in an industry that obviously affects the lives of virtually all of the state’s 39 million residents.

In fact, it works out to an average of nearly $10,000 a year for each of us, and we taxpayers are picking up most of the bill, the UCLA study found.

Federal, state and local governments finance more than 70 percent of California’s medical spending, which has expanded sharply in the last couple of years due to Obamacare.

The Affordable Care Act, as it’s officially known, not only offers subsidies for millions of Californians who obtain medical insurance through Covered California, the state’s health coverage exchange, but directly pays for expansion of Medi-Cal, California’s health care system for the poor.

The state expects Medi-Cal enrollment to reach 13-plus million this year, more than a third of the state’s population, and its federal and state spending to top $100 billion, the UCLA study found.

Providing Medicare coverage for California’s elderly will cost another $75 billion, and when health care for federal, state and local government employees and retirees, and tax breaks for private employer-provided coverage are included, the taxpayers’ bill is estimated at $260.9 billion. The remaining $106.6 billion comes from private health insurance and consumers’ out-of-pocket spending.

As governmental spending on medical care increases, it competes with other demands – such as K-12 and higher education – for shares of the public purse.

David Crane, a financial adviser to former Gov. Arnold Schwarzenegger, has written that constitutionally guaranteed K-12 spending, fast-increasing entitlements for medical care and public employee retiree benefits will inevitably erode college support, which doesn’t have the same legal protections.

He’s dead right on that.